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Insurance Terminology
As with many other industries, the insurance industry uses industry specific
terminology that is often difficult to understand. We have provided you a
glossary of common terms that are used throughout the industry as well as on
this Web site.
- Agent (producer):
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a.) An insurance salesperson.
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b.) An independent agent who does work for any insurance company and sells the
policies of more than one insurer;
- Broker:
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An insurance sales person who deals with agents and companies to find insurance
for the customer.
- Claim:
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A person's request for payment by an insurer for a loss covered under a policy.
Your claims to your company are "first-party claims." Claims made by one person
against another person's insurance company are known as "third-party claims."
- Collision
Coverage:
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Optional insurance that pays for damage to your car caused by collision with
another car or object, or by a car rolling over. This is frequently required if
you have a car loan.
- Comprehensive physical damage coverage:
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Optional insurance that pays for damage to your auto caused by something other
than a collision or the car rolling over, such as fire, theft, vandalism, flood
or hail. This is frequently required if you have a car loan.
- Conditions:
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Part of an insurance policy that states your obligations and those of your
insurance company in order for the policy to be in effect.
- Deductible:
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The amount, which you agree to pay, per claim or per accident. This is
subtracted from the total amount paid by your insurer. If the claims is $500
and your deductible is $100, you pay $100 and you insurance company will pay
$400. The higher the deductible, the lower your payment will be for the policy,
but the more you will have to pay out of your pocket if you file a claim.
- Insurance
Department:
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A state agency that enforces rules for the insurance business in each state.
These departments are valuable source of information about all types of
insurance as well as handling consumer inquiries and complaints.
- Insurance
company:
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A company that, in exchange for a fee (known as a premium), agrees to pay all
legitimate claims that may arise under your policy.
- Liability:
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A legally enforceable financial obligation.
- Liability coverage:
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Insurance that pays other people's losses that you have caused unintentionally
or through negligence.
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a.) Bodily injury liability coverage pays the medical costs of others and your
legal defense costs if your car injures or kills someone;
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b.) Property damage liability coverage pays the claims against you if you
damage someone else's car or property.
- Negligence:
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Failure to exercise a generally acceptable level of care and caution.
- Policy
Period:
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The amount of time insurance contract (policy) last.
- Policyholder:
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The person who buys insurance.
- Premium:
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The amount you pay for insurance coverage.
- Proof of loss:
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Documents that you give to the insurer to support your request for payment of
losses. The company uses these documents to determine whether and how much it
will pay. (Examples: written repair estimates from auto body shops, police
reports.)
- Uninsured motorist coverage:
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Insurance, which pays for your costs resulting from an accident involving a
hit-and-run driver, or a driver who does not have insurance
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